GFPT

GFPT Plc
3Q13F new high for earnings. We now forecast 3Q13F profit of Bt424mn, raising our earlier forecast 28% from Bt330mn, sharply up YoY from a loss of Bt24mn and up 40% QoQ, with gross margin of 13.5%, against 11.07% last quarter and 5.66% YoY. It began making new highs for profit in June 2013 at ~Bt150mn, with profit for each of the following three months at Bt120-160mn, boosted by better export and domestic sales volumes and average selling prices. Associates GFN (49% held by GFPT) and McKey (49%) are expect to contribute Bt76mn in 3Q13F, +1,122%YoY and +21%QoQ.
Broiler prices and raw material update. Broiler price has slid to Bt38-40/kg from a high of Bt47/kg in July and August 2013. Average 3Q13 selling price was Bt45/kg, (-4% QoQ, +25% YoY). Second and third quarters are traditionally the highest for chicken exports and in 3Q13 GFPT’s exports are estimated at 5,700 tons or 1,900 tons/month. However, the end of 3Q13 (September and October) is normally low season for local consumption because of the vegetarian festival and broiler prices on the domestic market have thus fallen to under Bt40/kg. We expect this to be temporary and to have negligible effect on spread since feed raw material prices have come down at the same time. Feed raw material costs, corn and soybean meal are also falling; corn is -9% QoQ,-16% YoY and soybean meal -4% QoQ, -17% YoY, thanks to new harvest with good yields in Brazil and China.
Export high season in 3Q. GFPT reports that it has done very well in 3Q13, the high season for exports to Japan (40% of GFPT export volume) and the EU (52%). Current price of export broiler to EU is US$4,200/, with US$5,000/ton for exports to Japan. The EU has given Thailand an annual export quota of 92,000 tons of frozen chicken and 160,000 tons of cooked chicken, a sharp increase from last year. GFPT has 5% of this export market. Market watchers expect good news soon – the successful resumption of fresh chicken exports to the Japanese market by the beginning of 2014, at an estimated 180,000 tons p.a., the level of Thai fresh chicken exports to Japan in 2003 before Japan closed its doors to Thai imports in 2004 because of the avian influenza.
Subsidiary turnaround lifts. GFPT’s two subsidiaries are doing much better. In 1H13, GFN and McKey contributed Bt92mn to GFPT, up from a loss of Bt111mn in 2011 and loss of Bt74mn in 2012. We expect profit sharing of Bt233mn and Bt257mn in 2013 and 2014. The major profit contributor in 2013 should be GFN at more than 80%.
BUY at TP of Bt12. The good report from the company has led us to raise 2013 net profit to Bt1.08bn from Bt980mn or Bt0.86/share. Our target price of Bt12 is based on 12x 2014 PER (EPS Bt1.0/share).